Correlation Between Canacol Energy and Valeura Energy

Can any of the company-specific risk be diversified away by investing in both Canacol Energy and Valeura Energy at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Canacol Energy and Valeura Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Canacol Energy and Valeura Energy, you can compare the effects of market volatilities on Canacol Energy and Valeura Energy and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Canacol Energy with a short position of Valeura Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canacol Energy and Valeura Energy.

Diversification Opportunities for Canacol Energy and Valeura Energy

0.53

Correlation Coefficient

Canacol Energy  Valeura Energy

Very weak diversification

The 3 months correlation between Canacol and Valeura is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Canacol Energy and Valeura Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valeura Energy and Canacol Energy is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Canacol Energy are associated (or correlated) with Valeura Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valeura Energy has no effect on the direction of Canacol Energy i.e., Canacol Energy and Valeura Energy go up and down completely randomly.

Pair Corralation between Canacol Energy and Valeura Energy

Assuming the 90 days horizon Canacol Energy is expected to under-perform the Valeura Energy. In addition to that, Canacol Energy is 1.03 times more volatile than Valeura Energy. It trades about -0.11 of its total potential returns per unit of risk. Valeura Energy is currently generating about 0.07 per unit of volatility. If you would invest  467.00  in Valeura Energy on October 11, 2024 and sell it today you would earn a total of  17.00  from holding Valeura Energy or generate 3.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Canacol Energy  vs.  Valeura Energy

Canacol Energy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Canacol Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Canacol Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Valeura Energy

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Valeura Energy are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Valeura Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canacol Energy and Valeura Energy

The main advantage of trading using opposite Canacol Energy and Valeura Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canacol Energy position performs unexpectedly, Valeura Energy can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Valeura Energy will offset losses from the drop in Valeura Energy's long position.

The idea behind Canacol Energy and Valeura Energy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .